Putting on my occasional Entrepreneurial Consultant hat for a moment, I’d like to discuss a common dilemma most service providers like myself have: Should you charge hourly, or by the project?
I’ll tell you straight up the answer is not set in stone. They both make sense for a variety of reasons, and are more or less dependent on what you do, how long you’ve been doing it, who your customer base is, and so on. In fact, because the answer is fairly complex, I will make this a four or five part series (that’s a treat, right?)
To start, let’s break this down into what each are.
Charging by the Hour is exactly what it sounds like. The customer understands that you will do the work, and present a bill based on how many hours the project took. Hourly rates can be seen as more professional (after all, if money were no object, which lawyer would you hire to keep you out of jail – Steven “Ace” Goldberg, who charges $250 an hour, or Fumbles McStutter, who has an “$800 jail-dodge special”?)
That said, many service providers starting out will shy away from hourly rates because they feel it will scare away prospective business.
Charging by the Project (aka: “flat fee” or even “piecework”.) Here, you figure out what the client needs, and give a flat fee for the entire project. Or, perhaps you offer a “piece rate” (for a writer, say “$XX a page”). This is seen as good because there are no surprises, and the client gets the work at a predictable cost. Plus, if you work fast, you can out-earn a person who charges hourly. Of course, that pendulum swings the other way when the client repeatedly calls with time-consuming questions…
Like I said, there are no easy answers. If I say charging hourly is better than project pricing, the Wedding Photographer says “but wait – in my industry, pre-priced packages are the norm”. If I say project pricing is better, the marketing consultant says “it’s impossible to project-price a product launch”. Again, both sides have merit, so we’ll explore this topic deeper. Next up will be the ins and outs of Project Pricing.
But before I go, let me state that I have done both, and at this point in my writing career, I do charge by the hour. My reasoning should become clearer as we go on.